COVID-19: Implications for Businesses
19 March 2020
COVID-19 is placing many restrictions on lives across Ireland and globally and businesses are of necessity feeling the effects. The disruption to normal procedures, as well as having serious implications on business operations, are naturally of concern to businesses and the likely adverse consequences need to be evaluated and where possible measures taken to mitigate the effects.
Businesses should take steps to adjust and importantly best protect themselves. We discuss below some issues of relevance for businesses at the moment.
1. Corporate Governance/Board Activities
There are a number of issues that Directors need to consider and take action accordingly as necessary, including:
- Meeting / exercising Board authority
- Authorised Signatures / Execution of Documents
- Exercising duties in interest of Company, but with due regard for employees and members
1.1 The Companies Act 2014 (Act) provides that unless the Company’s constitution provides otherwise, directors’ meetings may be by way of a conference call between directors who are not all in one place. The Act also provides that a director taking part in such a conference call will be deemed to be present in person at the meeting and be entitled to vote and be counted in the quorum (subject to normal limitations such as conflict of interest) and the meeting will be deemed to take place where the largest group of participants is assembled or where no such group is assembled, where the chairperson is located. If neither of these circumstances apply, the meeting itself can decide the location.
1.2 If the Company does not have the ability to conduct meetings by conference or otherwise cannot convene a meeting, decisions can alternatively be effected by way of Written Resolution. Under the Act, unless the company’s constitution provides otherwise, a resolution signed by all the directors entitled to receive notice of a meeting of directors will be as valid as if it had been passed at a directors’ meeting.
1.3 Directors’ decisions made by written resolution must be unanimous so that all eligible directors must vote on it in the same way. This means that the chairperson would not have a second or casting vote on any proposed action.
The written resolution can consist of several documents in like form each signed by one or more directors. The date of the resolution will be the date on which the last director signed, and the resolution will take effect from that time. The document may be circulated electronically for signing but the original will need to be retained by the company with the board minutes, in the manner required by the Act.
Other relevant provisions of a company’s constitution will continue to apply such as whether a director is prohibited from voting on a proposed action or cannot be taken into account for the purposes of ascertaining whether a quorum is present, for example, because of his or her interests in the matter. It may be that a director can be counted as forming part of a quorum if the director’s interest is not likely to give rise to a conflict of interest for the purposes of the proposed action, the constitution needs to be checked on this point.
The written resolution procedure can be used even if one or more of the directors (but not in aggregate being a majority of all directors) is not permitted to vote on a directors’ resolution (for example, by reason of a conflict). In this instance the remaining directors sign the resolution and note the names of the directors who are not entitled to vote and the reason for that.
If, in the current circumstances, a company’s standard authorised signatories are unavailable to sign necessary documents, it is possible for the board (by a meeting or written resolution) to authorise additional signatories.
1.4 It may be possible for documents to be executed by electronic signature
1.5 Many companies may be due to convene and hold AGMs in the coming weeks or months and COVID-19 will likely impinge on this. Please see our article: COVID-19 and holding the company AGM.
1.6 As a general point, as at all times, Directors should be mindful of their duties and bear in mind that while these duties are owed to the company as a whole, they are obliged to have regard to the interests of employees and members, as well as in circumstances to creditors. In this regard we advise directors to consult and comply with all Government and HSE guidelines on COVID-19 issues on an ongoing basis.
2. Contract and Operations Review
The effect of COVID-19 on businesses will be immense. Manufacturers may not be able to source materials so output will be affected and in turn its ability to meet orders and make supplies under contracts; service providers may face similar issues; employees may be unable to attend work; demand may already have reduced so that the business is in financial difficulty and unable to fully meet its financial obligations. To fully ascertain the implications of all this and to appraise options, a business must review fully its contractual documents.
Relieving factors such as a force majeure clause, a Material Adverse Change clause, specific provisions regarding when and how adjustments to price or other contractual provisions are to apply, may be relevant. Such provision may not however necessarily be activated because of COVID-19. These issues are discussed in detail, in our article on COVID-19: Commercial Contract Considerations.
3. Data Protection
The current COVID-19 situation and the measures being put in place to address the problem raise a number of GDPR issues which need to be borne in mind – some of these issues are addressed in our article by David Hackett, Head of our IP/IT & Data Protection Group.